IEEFA: Tidal wave of new LNG supply to flood market amid demand uncertainty

Sluggish demand growth for liquefied natural gas (LNG), combined with a record increase in global export capacity through 2028, will likely thrust markets into an extended period of oversupply, according to the latest Global LNG Outlook from the Institute for Energy Economics and Financial Analysis (IEEFA).

A tidal wave of new LNG export projects is set to boost global LNG export capacity by roughly 40% through 2028. Much of that new supply is being built in the U.S., which became the world’s top LNG exporter in 2023. Although the U.S. Department of Energy has paused authorizations for new export projects, U.S. LNG export capacity will still grow by 80% through 2028.

"If rapid and sustained demand growth does not materialize, LNG producers and traders—particularly those with higher costs and significant uncontracted supplies—will likely face an extended period of low prices and slim profits," said Clark Williams-Derry, Energy Finance Analyst and co-author of the report. “The specter of a global LNG glut clouds the prospects for new export projects in North America and around the world.”

The global LNG crisis following Russia’s full-scale invasion of Ukraine in 2022 has brought these issues to the fore, spurring many markets to reduce the role of LNG in their development plans and accelerate the development of alternative energy sources.

  • The IEEFA expects Europe’s gas and LNG demand to fall through 2030. Europe’s natural gas demand has declined 20% since 2021, due to fuel switching, increased nuclear and renewables generation, and energy efficiency measures.
  • LNG imports to Japan and South Korea fell 8% and 5%, respectively, in 2023. National energy and climate plans envision steep reductions in LNG’s role in both countries, turning instead to nuclear and renewable energy. Taiwan, on the other hand, aims to cut nuclear power, which may boost LNG demand.
  • China reclaimed its position as the world’s largest LNG importer in 2023. However, domestic natural gas production and additional pipeline imports may limit LNG demand growth. Unprecedented increases in renewables capacity are constraining the need for LNG in the power sector.
  • In South Asia, fiscal challenges along with the inherent volatility of LNG prices may constrain rapid near-term demand growth, and the role of LNG in power generation is likely to remain low.
  • In Southeast Asia, extensive development timelines, contract negotiations and repeated project delays for LNG-related infrastructure may continue to inhibit demand while strengthening political incentives to pursue alternative energy sources.

“Canada’s once-lofty ambitions to become a major player in the global LNG market are fading fast,” said Mark Kalegha, IEEFA Energy Finance Analyst and co-author of the report. “This is largely due to the continual rise in construction costs at associated production and transport infrastructure.”

As the U.S. has exported more gas during the Ukraine crisis, it shortchanged domestic supplies and imported price volatility from the global LNG market.

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